Foreign drug firms call for easing rules on pricing, reimbursement

By Park Si-soo

The government has tightened its control of the national health insurance budget in recent years to stave off a shortfall amid soaring elderly population here.

This has resulted in giving pharmaceutical companies less freedom in price-setting. In other words, these companies are forced to keep their product prices at artificially low levels for the sake of public health and welfare.

Proponents say this is something inevitable in the face of a rapidly aging society ― those aged 65 or older will account for 20 percent of population by 2026, up from 12.6 percent last year.

Yet, Lee Sang-suk, CEO of the Korean Research-based Phama Industry Association (KRPIA) representing 36 foreign drug companies here, doesn’t agree, calling the policy a “short-sighted” approach that will only make the situation worse. He noted that excessive state intervention in pricing and reimbursement will end up making global pharmaceutical giants reluctant to invest more and sell new medicines in Korea. It will also not help in homegrown drug makers’ overseas expansion, he added.

“Under the existing policy, foreign pharmaceutical companies’ investment in Korea will go down continuously,” Lee said in a recent interview with The Korea Times at the KRPIA headquarters in Gangnam, southern Seoul. “We found that our member companies made a smaller number of applications for clinical tests of new drugs in Korea last year than in 2013. This means Korea is losing attractiveness as an investment destination.”

The KRPIA rendered a 36-page petition to the Ministry of Health and Welfare in October, in which the lobby group called on the ministry to allow foreign drug companies to sell new products at higher prices and receive a bigger reimbursement from the national health insurance. It said the country’s reimbursement rate for new drugs was 44 percent of the average of OECD member countries. The KRPIA wants it to be increased to 60 percent.

“Our proposals to amend current pricing and reimbursement policies will help improve the health of the Korean population by enhancing access to new medicines,” the KRPIA wrote in the petition. “These benefits can all be achieved with a limited budget impact and no harm to the national health insurance’s financial sustainability.”

The KRPIA CEO, a former ranking bureaucrat at the ministry, called clinical tests “highly profitable” and said they bring various visible and invisible benefits into the domestic drug industry.

“To carry out a clinical test here, a foreign drug maker needs to share information and time-tested knowhow with local partners, spend a lot of money and hire employees locally,” he said. “Therefore, inviting more clinical tests to Korea means the country will have a higher chance to boost the international competitiveness of its pharmaceutical industry.”

He said this will make it easier for the government to materialize its goal of nurturing the pharmaceutical business as a new growth engine.

The government has pledged to increase the nation’s exports of pharmaceutical products to 11 trillion won from 2.3 trillion won by 2017.

The health ministry feels the need to amend existing policies regarding pricing and reimbursement to reach that goal.

“We are working to change policies so that there will be more research and development activities taking place here that will enhance the international competitiveness of Korean drug companies in the long run,” said Lee Sun-young, a director of the health ministry’s division of pharmaceutical benefits. “This will tempt foreign pharmaceutical companies to make more investments and conduct more clinical tests in Korea.”